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EARNINGS CONFERENCE CALL2020 First Quarter
April 29, 2020
FORWARD-LOOKING STATEMENTS
This presentation contains forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995, as amended.
These statements relate to future events or future performance of Norfolk Southern Corporation’s (NYSE: NSC) (“Norfolk Southern,” “NS” or the “Company”), including but
not limited to statements regarding future financial performance and anticipated results, benefits, and targets related to the strategic plan. In some cases, these forward-
looking statements may be identified by the use of words like “will,” “believe,” “expect,” “targets,” “anticipate,” “estimate,” “plan,” “consider,” “project,” and similar references
to the future. The Company has based these forward-looking statements on management’s current expectations, assumptions, estimates, beliefs, and projections. While
the Company believes these expectations, assumptions, estimates, and projections are reasonable, forward-looking statements are only predictions and involve known and
unknown risks and uncertainties, many of which involve factors or circumstances that are beyond the Company’s control, including but not limited to: general North
American and global economic conditions; changes in energy prices and fuel markets; uncertainty surrounding timing and volumes of commodities being shipped; changes
in laws and regulations; uncertainties of claims and lawsuits; labor disputes; transportation of dangerous goods; effects of changes in capital market conditions; severe
weather; and the impact of the COVID-19 pandemic on us, our customers, our supply chain and our operations. These and other important factors, including those
discussed under “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (the “SEC”),
as well as the Company’s subsequent filings with the SEC, may cause actual results, benefits, performance, or achievements to differ materially from those expressed or
implied by these forward-looking statements. Please refer to these SEC filings for a full discussion of those risks and uncertainties we view as most important.
Forward-looking statements are not, and should not be relied upon as, a guarantee of future events or performance, nor will they necessarily prove to be accurate
indications of the times at or by which any such events or performance will be achieved. As a result, actual outcomes and results may differ materially from those
expressed in forward-looking statements. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, the
occurrence of certain events or otherwise, unless otherwise required by applicable securities law.
2
2020 HIGHLIGHTS
3
James A. Squires
Chairman, President and
Chief Executive Officer
First Quarter
Norfolk Southern thanks our employees
for protecting each other and supporting our
customers. Your hard work and commitment
are a testament to the character necessary to
keep the steel wheels rolling.
4
FIRST QUARTER 2020 RESULTSStrategic transformation driving structural operating ratio improvement
5
1Q20Adjusted
1Q20 vs 1Q19
Revenues $2,625M $2,625M (8%)
Income from operations(1) $568M $953M (1%)
Operating ratio(1) 78.4% 63.7% (230)bps
Net income(1) $381M $669M (1%)
Earnings per share(1) $1.47 $2.58 3%
(1) Adjusted 1Q20 excludes $385M non-cash locomotive disposition charge.
Please see reconciliation to GAAP posted on our website on the Invest in NS page under Events for this event.
MARKETINGOVERVIEW
6
Alan H. Shaw
Executive Vice President and
Chief Marketing Officer
First Quarter
$2,840
$2,625
($14)
($64)
($137)
Merchandise Intermodal Coal Total
Revenue $1,672M (1%) $655M (9%) $298M (31%) $2,625M (8%)
Volume 569,100 (5%) 955,100 (11%) 163,500 (31%) 1,687,700 (11%)
RPU $2,939 4% $685 2% $1,826 (1%) $1,556 4%
RPU (less fuel)(1) $2,875 5% $589 2% $1,811 1% $1,478 5%
RAILWAY OPERATING REVENUE CHANGEQ1 2020 vs. 2019
(1) Please see reconciliation to GAAP posted on our website on the Invest in NS page under Events for this event.
Revenue change $ millions
1Q 2019 1Q 2020
13 consecutive quarters of year-over-year RPU growth
7
RECORD RPU LF
RECORD RPU
RECORD RPU LF RECORD RPU LF
COVID-19 AND ENERGY IMPACT
Automotive
Coal
Metals and Construction
Intermodal
Chemicals
Agriculture and Forest
(Bubble size represents percent of 2019 revenue)
MAGNITUDE OF COVID-19 IMPACTS
MA
GN
ITU
DE
OF
EN
ER
GY
IM
PA
CT
S
8
Resolution of COVID-19 and energy disruptions remains open-ended
OPERATIONS OVERVIEW
9
Michael J. Wheeler
Executive Vice President and
Chief Operating Officer
First Quarter
NETWORK PERFORMANCEExtracting additional operating leverage from the system
Train Speed(mph)
Terminal Dwell(Hours)
Metrics trending
better than 2019
despite tougher comps
Strong start to 2020
Record quarterly performance
• Terminal dwell
• Train performance
• Shipment consistency
• Intermodal availability
10
22.2
18.6
1Q19 1Q20
-16%
21.7
23.8
1Q19 1Q20
10%
SERVICE AND PRODUCTIVITY METRICSQ1 2020 vs. Q1 2019
Improvement in all productivity metrics
11
27%
ServiceDelivery Index
-13%
CarsOnline
20%
T&EProductivity
6%
TrainWeight
9%
LocomotiveProductivity
5%
FuelEfficiency
-4%
-6%
-9%
-11%
-2%
-4%
-11%
-15%
-19%
1Q19 2Q19 3Q19 4Q19 1Q20
Volume Crew Startsyear-over-year change
Phase 1 2 3Pre-TOP21
TOP21 OPERATING PLAN UPDATE
Flat
TOP21 Progress
• Reduced asset requirements
• Improved velocity
• Multiple initiatives to reduce
fuel consumption
• Reduced local and yard
assignments
TOP21 Evolution
• Complete Phase 3 in Q2
• Constant network plan
optimization
12
TOP21 driving crew start reductions
far exceeding volume declines
COVID-19 RESPONSE
13
Workforce Safety
• Dispersed Network Operations Center staff locally
• Distance and hygiene protocols for field operations
Operational Resilience
• Quick to store cars to preserve fluidity
• Reserve boards and “Go Teams” for T&E flexibility
• Proactive monitoring of gateways and subsidiaries
Customer Support
• Maintain high service levels
• Proactive customer communication
• Identify and prioritize critical shipments
Preparation and actionable triggers kept operating metrics high
APRIL: PRESSING THE TOP21 ACCELERATOR
14
• Pulldown of auto network
• Train consolidationsShort term
• Yard consolidations / closures
• Increased network blending
• Concentrating flows
Structural
FINANCE OVERVIEW
15
Mark R. George
Executive Vice President and
Chief Financial Officer
First Quarter
3,515Active
2,884Active
2,801Active
606Inactive
1,022Inactive
402Inactive/Surge
703Disposal
12/31/2018 12/31/2019 3/31/2020
LOCOMOTIVE RATIONALIZATION$385 million non-cash charge due to ongoing disposal of 703 locomotives
• Less inventory & mechanical resources
• Simplified power optimization
• Less yard congestion
• Lower average age + higher AC mix =
• Improved reliability
• Improved fuel efficiency
• Capacity dividend
Owned Locomotives
Target
fleet size
~3,200
22%
reduction
from a
year ago
Model Rationalization
Other Benefits
19Models
10Models
Legacy Fleet Post-PSR Fleet
16
OPERATING RATIO AND EPSItems Impacting Comparison to 2019
Strong core improvement in OR
favorable / (unfavorable)
17(1) Adjusted 1Q20 excludes $385M non-cash locomotive disposition charge.
Please see reconciliation to GAAP posted on our website on the Invest in NS page under Events for this event.
Operating
Ratio
Earnings per
share
Q1 2019 66.0% $2.51
Income tax refund - $0.09
Core results 230bps ($0.02)
Q1 2020 Adjusted (1) 63.7% $2.58
Change 230bps $0.07
FIRST QUARTER HIGHLIGHTSAdjusted Q1 2020 vs. Q1 2019
$ millions
$1,874
$1,672
2019 2020
$966$953
2019 2020
Operating
Income (1,2)
66.0%
63.7%
2019 2020
favorable / unfavorable
$202
11% $13
1%230bps
$2,840
$2,625
2019 2020
$215
8%
$414
$589
2019 2020
$175
42%
Operating
Expense (1,2)Revenue
Operating
Ratio (1,2)
Free Cash
Flow (2)
RECORD
18(1) Adjusted 1Q20 excludes $385M non-cash locomotive disposition charge.
(2) Please see reconciliation to GAAP posted on our website on the Invest in NS page under Events for this event.
OPERATING EXPENSE COMPONENTS
$1,874
$105
$61
$24$21
$9 $1,672
Compensation
& Benefits
Materials
& Other
Depreciation2019 Purchased
Svcs. & Rents
Adjusted
2020 (1)
Fuel
Focus remains on cost optimization
Adjusted Q1 2020 vs. 2019$ millions
($202)
↓14%
↓24%
↓5%↓13%
↑3%
↓11%
Empl costs $78
OT & recrews $17
Incentive pay $17
Materials $15 Purch Svcs $25
Rents ($4)Prices ↓12%
Consumption ↓15%
19(1) Adjusted 1Q20 excludes $385M non-cash locomotive disposition charge.
Please see reconciliation to GAAP posted on our website on the Invest in NS page under Events for this event.
FINANCIAL RESULTSAdjusted Q1 2020 vs. 2019
1Q19 1Q20
Variance
$ %
Income from railway operations (1)$966 $953 ($13) (1%)
Other income – net 44 22 (22) (50%)
Interest expense on debt 149 154 (5) (3%)
Income before income taxes (1) 861 821 (40) (5%)
Income taxes (1) 184 152 32 17%
Net income (1) $677 $669 ($8) (1%)
Earnings per share – diluted (1) $2.51 $2.58 $0.07 3%
$ millions except per share
favorable / (unfavorable)
20(1) Adjusted 1Q20 excludes $385M non-cash locomotive disposition charge.
Please see reconciliation to GAAP posted on our website on the Invest in NS page under Events for this event.
FREE CASH FLOW & SHAREHOLDER DISTR.
$230 $242
$500 $466
2019 2020
Shareholder Distributions
$ millions
$955
$366
$589
Property
Additions
Cash from
operationsFree Cash
Flow
2020 Free Cash Flow (1)
Dividends
Share
repurchases
+42%
vs 2019
RECORD
Q1 2020
21(1) Please see reconciliation to GAAP posted on our website on the Invest in NS page under Events for this event.
OUTLOOK
22
Structural
Semi-variable
Volume-variable
Comp
& Ben
Purch
Svcs
Deprec Fuel Mat &
OtherEq
Rents
Modeling durable 2020 free cash flow thanks to cost discipline and operational performance
2020 guidance for revenue and OR withdrawn
Illustrative Cost Structure
• Duration of downturn
• Pace of anticipated recovery
• Network safety
• Service product
Semi-variable decision factors
Absolute requirements
Modeling a range of revenue scenarios
FINANCIALLY RESPONSIBLE
23
Cash$600
UndrawnFacilities& COLI
loancapacity$1,800
IssuanceAuthority
$2,400
Liquidity
Sources
$314
$83
$500
Jun2020
Mar2021
Dec2021
Debt
Maturities
Maintaining Access to Capital
$ millions
$4,800
$1,951$2,019
$1,500
2018 2019 2020
~($500)
~(25%)
Capital
Expenditures
Comfortable Debt Ladder Aggressively Rationalizing Spend
• Strong Q1 results demonstrate PSR success
• Proactive COVID-19 response
• Capital and operating expense control
• Resiliency in navigating market disruptions
24
CLOSING REMARKS
APPENDIX
25
ITEMS IMPACTING COMPARISON TO 2019
First Quarter
Non-cash locomotive charge $ (385)
Income tax refund 23
Impact:
Operating ratio (1470)bps
Earnings per share ($1.02)
26
$ millions except per share
favorable / (unfavorable)
THANK YOU
27